Getting a Mortgage After Bankruptcy.

If you have had to declare bankruptcy, you may be wondering what is next.

Bankruptcy is not a financial death sentence. In fact, there are a few things you can do after declaring bankruptcy to help reset your financial status and get a mortgage in the future.

While there is no waiting requirement to apply for a mortgage after bankruptcy, it is essential to allow your credit time to heal in order to ensure approval.

The first step to rebuilding your credit is getting a secured credit card. If you are able to show that you are responsible with this credit card by paying your balance in full each month and not overspending, it will help to improve your credit score.

Once you’ve re-established your credit, you can apply for a mortgage. What type of mortgage you can apply for, and whether or not you qualify, will depend on a few factors, such as: how long ago you declared bankruptcy, the size of your down payment, your total debt-to-service ratio (how much debt you are taking on compared to your total income) and your loan-to-value ratio (loan value versus the property value).

Depending on this, you will have three options for your future mortgage loan:

Traditional or Prime-Insured Mortgage

This is a traditional mortgage, which will typically offer the best interest rates. To apply for this type of mortgage after bankruptcy the following requirements apply:

• Your bankruptcy was 2 years, 1 day previous
• One year of re-established credit on two credit items (credit card, car lease, loan).
• Minimum down payment of 5% for the first $500,000 and 10% for any additional amount over that
  • You have mortgage insurance – required for all down payments under 20%
• The total debt-to-service ratio of 44% maximum
• The loan-to-value ratio is 95% minimum

Subprime Mortgage

This type of mortgage falls between a traditional and private mortgage, meaning you qualify for more than private but not enough for a traditional loan. To apply for this type of mortgage:

• Your bankruptcy was 3 – 12 months prior
• You have a total debt-to-service ratio of 50% maximum
• Your loan-to-value ratio is 85% minimum

Private Mortgage

If you don’t qualify for a traditional or subprime mortgage, you can look into a private mortgage. Typically, your interest rate will be higher on a private mortgage but there is no waiting period after bankruptcy and the requirements are as follows:

• A down payment of 15% of the purchase price
• Obtained a full appraisal
• Paid a lender commitment fee – typically 1% of the mortgage value
• The loan-to-value ratio is 80% minimum

If you have previously declared bankruptcy and are now looking to start over and apply for a mortgage, don’t hesitate to reach out to Vinil for expert advice and to review your options today.

If you are a self-employed client who owns your own business, you may have chosen to set that business up as a corporation. This means the business operates as essentially its own person. They have income through business revenue and expenses from marketing costs, materials, office space, etc.

There are a few benefits to putting a mortgage under the corporation instead of your individual self:

1. Corporations tend to pay a lower tax rate than the personal income tax rate. Corporations only pay taxes on net business income.
2. Lenders can look at the business income or personal income.
3. Adding the net business income or the personal income from year 1 and year 2 and dividing it by two is the income a lender will associate with that borrower. Corporations with multiple shareholders will affect this process.

There are two ways one can go about this type of corporate mortgage. Is the corporation the operating company or acts as the holding company?

Mortgages and Operating Companies

As with any mortgage, there are considerations, and more so when looking to put your mortgage under your corporate umbrella. The lender will package your application differently, even though you essentially qualify as if you were buying a property in your name. You would be instead qualifying as a corporation with a personal guarantee from yourself.

It is also possible to do a mortgage deal under your personal name but utilize both personal and corporate income. Lenders can do this by looking at both personal T1 generals and respective NOA, plus you can qualify by looking at the Net Business Income before taxes as seen on company financials.

When it comes to getting a mortgage under an operating company (versus a holding company), you may encounter limitations with the lenders that provide this type of deal. You would be looking at an Alt-A (B Lender) to finance this particular mortgage, which may come with higher interest rates.

Mortgages and Holding Companies

When it comes to getting a mortgage under a holding company, you will find things are a bit easier. Having a mortgage under a holding company removes limitations or liability from the operating company with regard to the mortgage.

You must meet the definition of a Personal Holding Company (PHC) or Personal Investment Company (PIC) per the bank. This is typically considered “a Canadian incorporated entity established by an individual or individuals for the purpose of conducting investment activities, which can include holding real estate, and/or investments. Personal Holding or Investment Companies, and the owner of the PHC or PIC must qualify personally, and sign as covenantor”.

Some additional reasons to consider a mortgage under a corporation or holding company include:

1. To flip properties rather than hold them as rental revenue.
2. Retaining corporate profit that can be used to buy a property without withdrawing money personally and incurring personal tax.

For some individuals, the benefits might not be enough to convince them to put their property under the corporation. For others, it may be the perfect solution.

Contact Vinil to find out how lenders will view your income if you have your business set up as a corporation.

oration but for others, it may be the perfect solution.

The economic landscape for young Canadians can be a rugged terrain to navigate. They face uncertainty due to increased interest rates and inflation. This can be frustrating for those just beginning to build their career, considering buying a home or starting a family. If you are a parent, you may wonder how to support your child during this time. The CHIP Reverse Mortgage offers a financial solution that can help you provide a tax-free gift to your loved ones.

One way to support your adult children is by providing them with an early inheritance. This can help them pay for their wedding, start a business, pay off student loans, make a down payment on their home, or use the funds to improve their lives in other ways. By giving an early inheritance, you can avoid probate fees and potentially save money by lowering your tax bracket. Speak to your tax specialist for more information.

You may have considered using a home equity line of credit (HELOC) or liquidating your investments to provide an early inheritance. However, there are disadvantages associated with these options. This includes loss of earnings or tax payable when it’s time to sell your investments. The CHIP Reverse Mortgage offers a solution that allows you to unlock up to 55% of the equity in your home without these challenges. Your investments remain intact, and you are not required to make mortgage payments, so your income is not affected. Best of all, the funds you receive from the CHIP Reverse Mortgage are tax-free!

The CHIP Reverse Mortgage can help you support your loved ones. Contact Vinil for more information.

A second mortgage is a mortgage that is taken out against a property that already has a home loan (mortgage) on it. Generally, people take out second mortgages to satisfy:

• Short-term cash or liquidity requirements
• Have an investment opportunity
• Pay off higher-interest debts (such as credit cards and student loans)

If you are considering a second mortgage for any reason, here are a few key points to keep in mind:

Second Mortgages and Home Equity

Your second mortgage and what you can qualify for hinges on the equity that you have built up in your home. Second mortgages allow you to access between 80 and 95 percent of your home equity, depending on your qualifications.

For example, if you seeking 95% Loan-to-Value loan (“LTV”):

House Value =                                                       $850,000
95% LTV (maximum mortgage amount)               $807,500
less: First Mortgage                                               ($550,000)
Amount Available Through Second Mortgage     $257,500

Second Mortgages and Interest Rates

When it comes to a second mortgage, these are typically higher-risk loans for lenders. As a result, most second mortgages will have a higher interest rate than a typical home loan. There is also the option of working with alternative and private lenders depending on your situation and financial standing.

Second Mortgage Payments

One advantage when it comes to a second mortgage is that they have attractive payment factors. For instance, you can opt for interest-only payments, or you can select to pay the interest plus the principal loan amount. Work with your mortgage broker to discuss options and what would work best for your situation.

Second Mortgage Additional Fees

A second mortgage often comes with additional fees that you should be aware of before going into the transaction. These fees can vary widely but often are a percentage of the mortgage.  Other fees to consider include appraisal fees, legal fees to set up the second mortgage, and any lender or broker administration fees (particularly with alternative or private lenders).

Second mortgages are a great option for many homeowners. It may be a better solution than a refinance or a Home Equity Loan (HELOC). If you want to find out if a second mortgage is right for you, don’t hesitate to reach out to Vinil.

Many people are avoiding longer-term fixed mortgages, expecting rates to go down. Here’s why you should consider a 5 Year fixed rate for your mortgage in this market.

• The Bank of Canada raised overnight rates by 25 basis points last week. This means variable rates are high and may increase even more in 2023.
• You can break a fixed-term mortgage when rates come down. Be sure to get a fixed rate that has a low penalty. Typically, banks will charge a higher fee than monoline lenders for breaking fixed terms.
• Right now, 5 year fixed rates are approximately 2% lower than variable rates. This means that you’re more likely to qualify for a fixed rate and maintain a stable payment structure.

Contact Vinil at (250) 309 5482 to schedule a no-obligation appointment regarding your next mortgage term.

I have been working in lending for the past 2 years. Here are common mistakes people make.

Not checking their credit score for errors

• Credit scores can have mistakes such as incorrect credit card balances, open lending products, and even the wrong date of birth. Check your credit score every year to make sure there are no mistakes.

Not using a Mortgage Broker

•  You may only be able to check out a few different lenders but brokers have access to hundreds of different mortgage products, making it much easier to find the best mortgage to fit your needs.

Not having a clear understanding of what they need

• Many people simply look for the mortgage with the best rate. However, there are many things to consider including prepayment options, penalties, and more.

Not providing documentation in a timely manner

• This will delay the application process and may make things like credit bureau and rate holds null and void. Be sure to send your information as soon as possible.

Making large purchases during the application

• While going through an application, be sure not to rack up debt or degrade your financial position. This may result in losing the deal, even if you have been approved.

Contact Vinil for a no-obligation meeting to help you pursue your financial goals.

Using Home Equity to your Advantage

Canadians have been borrowing against their home’s equity in record numbers, taking out billions of dollars in cash each year. There has been a large movement to refinance home loans and pull out equity for things like:

• Home improvements
• Investments
• College expenses
• High-interest debt consolidation

Many people used to view their homes as a safe haven, but they are now more willing than ever to borrow against the equity they have in them. Whereas home equity was once relied upon, it is now frequently utilized. While taking equity out of your home may be a smart move, you should be aware of both the advantages and potential risks.

To talk about ways to make the equity in your home work for you, get in touch with Vinil.

The holidays are a season of giving and oftentimes, households find themselves carrying some extra debt as we enter the New Year.

Who Should Consolidate Debt

If you happen to be someone currently struggling with some post-holiday debt, that’s okay! Whether you’ve accumulated multiple points of debt from credit cards or are dealing with other loans (such as car loans, personal loans, etc.), you are likely looking for a way to simplify and reduce your payments. Rolling them into your mortgage could be the perfect solution.

Benefits of Consolidating Debt

Consolidating other forms of debt into your mortgage has multiple benefits. This can help you pay off your loans with smaller monthly payments, and often at a reduced interest rate compared to a credit card. By freeing yourself from these high-interest rates and gouging interest payments, you will not only have more money each month but have a better chance of taking back your financial control and getting your loans completely paid off!

If you’re still unsure if this is the right solution for you, here is an example… if you have $30,000 of credit card debt, you may be paying about $500 in interest. Vinil can help you to roll that debt into your home equity and monthly mortgage, your payment to this $30,000 portion with interest charges closer to $140 per month.

Debt consolidation into your mortgage may help with reducing interest charges and making your loan more manageable. It is also much easier to pay a single monthly installment versus managing many different loans or bills. Your mortgage will increase since you have to add the debt to your existing mortgage amount. However, the benefits of lowering your overall payments and management can be well worth it. Keep in mind, you need at least 20 percent equity in your home to qualify for this adjustment.

If you are looking for a way to simplify (or get out of) debt, reach out to Vinil! He would be happy to look at your current mortgage and help you come up with the best option.

While a bank only offers the products from their particular institution, mortgage brokers send business to Canada’s largest banks, credit unions, and other financial institutions. This offers their clients more choice, and access to hundreds of mortgage products!

Clients benefit from the trust, confidence, and security of knowing they are getting the best mortgage for their needs.

Canadians may purchase a home, take out equity from their home, or their mortgage is up for renewal. It is important that you are making the right decision with the right advice.

By understanding mortgage terms, you can save the most money and choose the term that is right for you.

There are many factors, which you will also have to take into consideration when you select your mortgage term length.

If paying your mortgage places you close to the edge of your comfort zone, you may want to opt for a longer-term mortgage. This is to ensure that you will be able to afford your mortgage payments should the interest rates increase. By the end of the mortgage term, most buyers are in a better financial situation and have a lower principal balance due. Should interest rates rise, buyers will be able to afford higher mortgage payments.

If you are shopping for a mortgage for an investment property, you may consider choosing a longer mortgage term. This will allow you to more accurately project your future income from the property.

Choosing the right mortgage term is a unique decision for each individual. By understanding your personal financial situation and your risk tolerance, Vinil can assist you in choosing your mortgage term.